The Internet economy is growing faster than ever thanks to smartphone usage and falling mobile data prices. Taking the cue from this, from food to e-commerce, many companies are establishing their business online to expand their reach.The fast digital adoption clearly means a big thing for countries looking for economic growth and development.

A joint study released by Google and Temasek Holdings, predicts Southeast Asia’s digital economy will exceed $240 billion by 2025, $40 billion higher than previously estimated. The study first published in 2016, estimates that the Southeast Asian Internet economy has reached $72 billion in gross merchandise value (GMV) in 2018 across industries like Online Travel, e-Commerce, Online Media, and Ride Hailing.

The Internet Economy On The Rise

Growing at 37 per cent from a year earlier, it has accelerated beyond the 32 per cent compounded annual growth rate (CAGR) that we recorded between 2015 and 2018, therefore hitting an inflexion point. With the addition of the new sectors of Online Vacation Rentals, Online Food Delivery, and Subscription Music & Video on Demand, and amid the accelerated growth observed across all sectors, the Internet economy in the region is on track to exceed $240 billion by 2025 — $40 billion higher than previously estimated.

The study titled “e-Conomy SEA 2018′ leverages Google Consumer Barometer, Temasek research, industry expert interviews, and third-party sources, to provide the best available estimates and projections of the Internet economy metrics and trends.

Number of Internet Users In Southeast Asia’s Six Largest Economies

Indonesia: The study observes that the Indonesian “digital archipelago” is firing on all cylinders. Supported by the largest Internet user base in the region (150 million users in 2018), Indonesia has the largest ($27 billion in 2018) and fastest growing (49% CAGR 2015-2018) Internet economy in the region. With huge headroom across all sectors, it is poised to grow to $100 billion by 2025, accounting for $4 of every $10 spent in the region, it adds.

Thailand: In Thailand, the second largest Internet economy in the region ($12 billion in 2018, 27% CAGR in 2015-2018), growth has been driven by one of the most vibrant e-commerce markets as well as by rapid growth in online advertising and gaming. The ride Hailing and online travel sectors still offer huge headroom for growth and are increasingly attracting investments from Southeast Asian unicorns (private companies that have reached $1 billion valuations) such as Go-Jek, Grab, and Traveloka.

Vietnam: In Vietnam, the Internet economy ($9 billion in 2018, 38% CAGR in 2015-2018) is akin to a dragon being unleashed. With e-Commerce almost doubling in 2018 from a year earlier, and with Online Advertising and Gaming growing at more than 50 per cent year on year, the Vietnamese internet economy is booming. Amidst one of the lowest penetrations of online travel bookings in the region, the Online Travel market has also huge headroom for growth.

Malaysia: Malaysia ($8 billion in 2018, 19% CAGR in 2015-2018) and Singapore ($10 billion in 2018, 16% CAGR in 2015-2018) — the most developed economies in the region on a GDP per capita basis — are both experiencing growth in the high teens. Excluding the sizable and more mature Online Travel sector, annual growth rates exceed 25 per cent in both markets. In order to unlock their full potential, the Malaysian and Singaporean e-commerce sectors need to further accelerate and reach the adoption level typical of countries with comparable income per capita.

Philippines: Lastly, the Internet economy in the Philippines ($5 billion in 2018, 30% CAGR 2015-2018) is still a relatively untapped opportunity. Despite having the second largest Internet user base (75 million) in Southeast Asia, the Philippines have not yet generated unicorns nor shown the dynamism of the Indonesian and Vietnamese markets. With increased focus and investments from regional unicorns and local startups, we estimate that the Philippines could ignite growth beyond 30per cent CAGR and fully achieve its long-term potential.